PHILIPPINE PROPERTY MARKET REPORTS

4Q 2017 - Office, Residential, Hotel and Industrial

We are pleased to announce that the 4th quarter 2017 property market report is now available. Global real estate services company Colliers International, in a recently released report, identified key issues and opportunities in the Philippine property market particularly in the office, residential, hotel and industrial.

OFFICE

Today, the office sector is better-positioned compared to a year ago with the late 2017 surge of PEZA building proclamations and a well-established government with clear economic policies. Relations with other countries such as the United States, Japan, and China have been proven relatively stable, which should keep investors interested. We see the growth in demand supported by the following: (a) POGOs growing throughout the term of the current administration; (b) Traditional companies expanding with the growing economy; (c) Strong pre-leasing activity; and (d) Improved demand from BPOs brought about by the faster pace of PEZA proclamations of buildings. We recommend that developers ensure timely completion of buildings so tenants may consider their projects. Alternative business districts, most of which are already due for upgrades, are of particular interest as rents are at a discount to primary CBDs. The upcoming supply in various locations offers massive opportunities for tenants looking to relocate or consolidate.

RESIDENTIAL
Primary CBDs saw marginal changes in vacancy from last quarter. Manila Bay Area and Fort Bonifacio have the highest vacancy driven by the size of stock available in these locations. Manila Bay Area vacancy improved from 18.3% to 17.2%. We attribute this to the absence of new supply in the location during the quarter and the growing demand from employees of offshore gambling companies which typically look for a residential component to complement their office space requirements. Meanwhile, Fort Bonifacio saw a slight increase in vacancy from 15.3% to 15.7% given the new supply in the area, offset by demand from young professionals. Colliers recommends strategic positioning of products from developers. This will enable developers to ride on the surge in demand driven by starting families and the growing Chinese and Korean communities. Location will be key to ensure viable returns for buyers and owners in a market where massive supply exists. Projects in primary CBDs and those in easily accessible surrounding fringe areas will be the best investments.

HOTEL
Foreign arrivals to the Philippines reached 6.62 million last year, a record-high. This sustained hotel occupancies across Metro Manila. Colliers is optimistic that foreign arrivals will continue to rise over the next three years given the sustained interest from Chinese, Japanese, Korean, and American tourists as well as the rising arrivals from the Philippines' emerging tourist markets such as Indonesia, Vietnam, France, Germany, and the United Kingdom. Coupled with the improvement of the country’s infrastructure backbone and aggressive implementation of the Tourism department's cruise tourism, homestay and “Invite Home A Friend” programs, Colliers is optimistic that foreign arrivals could grow by a faster 10-15% this year or reach between 7.3 million to 7.5 million. Hotel occupancies surged in November and December and we attribute this to the country’s hosting of the regional summit from November 11 to 14 and the holiday-induced spending on hotel accommodation, restaurant and other related businesses. The fourth quarter is a traditionally strong period for the hospitality sector primarily buoyed by ‘staycationing’ Manila residents, and foreigners and Overseas Filipinos Workers (OFWs) who spend holidays in the Philippines.

INDUSTRIAL
We see overall vacancies in the Cavite-Batangas-Laguna area hovering below 8% to 9% annually until 2020 as investors' committed projects eventuate. Meanwhile, we expect more industrial developers and occupiers expanding to Northern and Central Luzon provinces such as Pampanga, Zambales, and Tarlac due to the Duterte administration’s plan of developing crucial infrastructure within the region. Major projects in the pipeline are the Clark Airport expansion and modernization; passenger rail from Malolos, Bulacan to Clark Green City in Capas, Tarlac; and the Subic-Clark cargo railway. The latter covers a 77-kilometer rail connection linking Subic Port with Clark International Airport. The project should decongest Manila port and lower the cost of shipping goods. Once completed, it would raise the utilization rate of Subic port and complement the operations of Clark airport. The project would play an important role in developing the Northern-Central Luzon regions as an alternative hub for industrial operations. With manufacturing and exports becoming major planks of the country’s economic growth, we recommend that developers take advantage of the robust outlook by developing more standard factory buildings (SFB); apportioning a fraction of township projects for industrial activities; identifying feasible industrial locations outside of Luzon; and thoroughly evaluating the government's manufacturing roadmaps to align industrial park developments with the demands of the emerging manufacturing segments.

Learn more on what transpired during the fourth quarter by downloading the links below.